Graham Henry has had precious few lows in his long coaching career, but the 2001 British and Irish Lions tour to Australia was one of them. It was not so much the 2-1 series defeat to a team that was then the World Cup holders, with the outcome in doubt until the last whistle in the final Test, but the rancorous nature of the trip.

A limited preparation time and short build-up for a team involving players from four countries persuaded Henry, who had left New Zealand to take charge of Wales in 1998, to decide his Test team early on. Thwarted ambition led to disaffection which some players made public and it took Henry a long time to recover from the fall-out.

"I learned more from that experience as a coach than any other," says Henry from his home in Auckland. "I did not do things as well as I should have and made some wrong decisions,. If I had got them right, we would have won the series. I thought I could do the job, but I was green as an international coach then. I now know that the position of Lions head coach is the most demanding in Test rugby."

Henry admitted in Bob Howitt's authorised biography last year, Final Word, that he had failed to appreciate that individual agendas counted for more in the home unions than they did in New Zealand and that when his Wales captain, David Young, told him more than a week before the first Test that a number of players were upset because they felt they had been cut adrift, his reaction was one of surprise.

History is repeating itself in the Lions' first tour to Australia since 2001. The head coach is a New Zealander who is in charge of Wales, even if Warren Gatland has taken a sabbatical from his permanent job for most of the season. There, Henry believes, the similarities end, and he does not see Gatland returning to Wales at the end of the tour emotionally drained and having to deal with disgruntled players.

"Warren is an outstanding coach with a wealth of experience," says Henry, who, since retiring from the All Blacks after the 2011 World Cup success, has worked with Argentina and the Blues, mentored coaches and founded a coaching website, therugbysite.com. "He has led Wales to a couple of grand slams and they retained the Six Nations this year: I know he was not around, but it was his set-up. He had a successful spell with Ireland previously and he understands what the Lions are all about. He is exactly the right man for the job.

"I do look back on 2001 with some fond memories because the Test series was terrific with some outstanding rugby played. There was nothing between the teams, seven tries each, and it went to the very end, even though by the third Test injuries had really hit us hard. I managed the tour as I did because we were in Australia at the end of a long, hard season and we had had minimal preparation time. What we did show was that we were a very good rugby side."

On Tuesday Gatland will announce his squad for Australia. The selection process is different to 12 years ago when each of the four home unions supplied a selector, but it remains a delicate balance, not so much an avoidance of trampling on national sensibilities as spotting potential partnerships and identifying players who will not allow personal disappointment to pollute the team environment. Sir Ian McGeechan, who was in charge of the Lions in 1989, 1993, 1997 and 2009, always said that the crucial moment in a tour was when the team to play in the midweek match before the first Test was announced, because it was the point when he could no longer tell everyone they were in the frame to make the Test side.

"Selection is key," says Henry. "It was a long process in 2001, and quite rightly. Each of the four countries was represented in the many meetings and we had to make rational decisions. You look at potential partnerships and what you think will work. It is not an easy task, even though you are picking from four of the leading countries in the world. The players you choose are, virtually exclusively, the No1s in their positions in their countries, class acts, but the Lions is another team.

"Warren has had a long time to look at players, but in the end selection comes down to opinion and in that sense, picking the Lions is the same as selecting any team. Otherwise it is different, blending players from four countries for a tour that comes around every four years. What happened in the Six Nations is one factor but it is also about figuring out what it will look like in Australia when you have to pick the best players from the best players."

The Lions have not won a series since 1997, when a robust defence and the boot of Neil Jenkins proved successful in South Africa, but they are regarded as the favourites. The Wallabies are considered the weakest of the Sanzar nations, limping their way through 2012 when, at various stages, they lost 32 players to injury. Their coach, Robbie Deans, another New Zealander, will have to reapply for his job after the tour with his contract at an end and even victory may not be enough to save him.

It was different in 2001: the World Cup-winning coach in 1999, Rod Macqueen, had stayed on to test himself against the Lions, along with his captain, John Eales. Henry, who coached Auckland against the 1993 Lions and in 2005 was in charge of the All Blacks when the Lions visited New Zealand, expects the Wallabies to be as resourceful and hard to beat as they were 12 years ago.

"You only have to look at this year's Super 15 to see that Australian players have a different stride," he says. "Their teams have played some exceptional rugby and what everyone should always be aware of is what a Lions tour means to Australia, New Zealand and South Africa. For some players, it is not even a once-in-a-lifetime's chance because a tour comes once every 12 years, so for those who are in the frame this year, it is hugely stimulating. Supporters love the tours: they arrive from Britain and Ireland in their many thousands and Test tickets do not remain on sale for very long. I expect it to be another close series."

When Henry returned to Wales in 2001, he had little more than six months in charge of the national side to go. He offered to resign that autumn and departed after an opening Six Nations defeat in Dublin. The Lions tour had burned him out, but after a recharge in Japan and New Zealand, he was appointed head coach of the All Blacks at the end of 2003 and survived a World Cup quarter-final defeat to France in 2007 to lead the All Blacks to the trophy in Auckland in 2011.

One of the changes he made after the Lions tour was to involve players more in decision-making. "It is no longer a you-and-them culture," he says. "It is an us culture. Warren knows what it takes to succeed and I wish him well. The Lions remain huge in the overall context of the game because they add so much to it. We have to make sure they remain."